Before today, I think the US dollar was about 60% of the SDR bucket of currencies.
For years I have read about probable problems if the US dollar was no longer the reserve currency, but it seems from what I have been reading that there is some sort of negotiated slow migration from the US dollar to using SDRs as the reserve currency.
I like slow and steady change, even is it means that eventually my country (USA) will lose a lot of economic advantage.
The USD has gone from 41.9 to 41.73% in the SDR basket. So, no change in the Dollar status. The Euro has gone down the most from 37.4% to 30.93%. The importance of SDR as a reserve currency is not accurate.
What problems have you read about the U.S. facing if it stopped being a reserve currency? My understanding is that we would lose seigniorage, and maybe see a small increase in borrowing costs.
But the upside is value of the dollar would drop, making U.S. exports more competitive.
IMO US federal debt will likely become an increasingly significant issue. Interest costs of losing reserve status may be small or large. It really depends on market confidence. And given historically low rates today, significant cost increases are not that unlikely if US loses influence on global of monetary policy. From this large cost increases could put the currency in a death spiral given ~450 billion annual repayment costs already at todays low rates.
Please note I'm not saying this will happen, but feel it should be a recognized risk if borrowing continues at the current trend. I believe this is an elephant in the room which is likely to cause a massive macroeconomic shock in 5-20 years. I simply cant see the current political parties making the sacrifice to address the unfettered debt growth. I too recognize most financial experts tend to disagree with this view.
They also have to allow more transparency and access into their financial markets. Being part of the club has costs too. They probably did it because they think they're ready for it.
For years I have read about probable problems if the US dollar was no longer the reserve currency, but it seems from what I have been reading that there is some sort of negotiated slow migration from the US dollar to using SDRs as the reserve currency.
I like slow and steady change, even is it means that eventually my country (USA) will lose a lot of economic advantage.